Biotech analyst at Jefferies. Really great to have Assembly Biosciences with us today. Jason Okazaki, CEO, and Katie Kitrinos, SVP of Preclinical R&D. Welcome. Thanks. I think before we get into Q&A, why don't I pass it to you, Jason, for just some high-level thoughts around Assembly, and an upcoming catalyst to pay attention to. Sure. I think as you might recall, last year was a pretty big year for us from an HSV standpoint. Our two flagship molecules, ABI-5366 and ABI-1179, both demonstrated high proof of concept data in the Phase I-B studies. We actually ended the year with Gilead opting in to both of those programs under the collaboration. As of December, when they opted in, they now control development and commercialization efforts going forward. The next catalyst on that collaboration front that we're expecting imminently, I would say, is we're expecting the clinical development plan from Gilead, where they'll inform us as to which molecule, if not both, they're planning on moving forward into Phase II and Phase III, and then the commercialization plan as well. Based on that, we have an option to opt into a 40/60 U.S. cost profit share split. We'll evaluate that and our guidances, and we'll make that decision in the mid-year. That'll be the next catalyst for the HSV-2 program. For 6250, which we've been developing for the past few years for hepatitis delta, last year we announced very positive phase I-A data that showed target engagement and bile acid elevation, which is exactly what we're hoping for. We've now finished chronic tox on that molecule and plan to initiate the phase II study for delta by end of this year, expecting data second half of next year. Most recently, two weeks ago, seems like an eternity ago but two weeks ago, we announced expansion of ABI-6250 into PBC, PSC, and that's based on really over the past year and a half, we've been talking to KOLs, both from a mechanism standpoint and from a clinical standpoint, as to potential uses for the mechanism. I know I talk a lot about this, the NTCP inhibitor, which inhibits basically bile acid entry into the hepatocytes, the use of that for cholestatic liver diseases. We've been doing a deep dive into that, including having a pre-IND meeting with FDA two weeks ago, which culminated in us announcing the program and receiving funding for that program through end of phase II. We expect to initiate those studies for the phase II studies for PBC and PSC by first quarter 2027 and expect data on those in first half 2028. While this was more of an execution year, I think with the addition of PBC, PSC, it just kind of increases our catalyst for starting second half of next year and beyond. Great. I think first on the kind of mid-year decision on whether to opt in or not, can you just talk us through what you're hoping to see from Gilead in terms of that clinical development plan, and what are those factors that you're looking at to inform your decision there? Certainly before Gilead took over, we had our design of a clinical development plan. All we're looking to see really is how are they approaching the chronic suppressive, the phase II, the phase III, are they going to look for indication expansions to run other trials? It's largely a cost estimate, right? It's a largely quantitative analysis where certainly we'll do an NPV analysis of the costs and the profit share from the U.S., compare that against the milestones and the royalty structure, in which case we would not be bearing any kind of cost for phase II, phase III, or commercialization, and kind of see where that lays out. I think from a qualitative standpoint, the good news is we don't have a co-promote right on that, so it's not like we would have to think about building out a commercialization. It is largely quantitative, but I think we'd say the other competing factors are certainly even to fund a 40% share of a phase II, phase III, and commercialization launch, it's going to be a significant raise down the road. You always think about dilution, right? The shareholders are always thinking about that. I think largely the focus will be on long-term value, of course, which is our responsibility. We'll think about does that 40% profit share outweigh the cost from an NPV standpoint. We'll expect to very much dig into that development plan and make sure we agree with it, A, and then B, just make sure the costs align with our expectations and then look at the profitability long term. Got it. Do you have any kind of initial thoughts in terms of whether or not Gilead would move forward with one over the other or both? We don't. It's such a close call because both those molecules have great profiles and both of our companies TPPs, which is an oral small molecule once-weekly dosing. What we saw on the phase I-B is it has the high potential of superior efficacy to the TPP, which is a TPP. I think you're honestly looking at there's a slight potency difference between 1179 and 5366 formulations, slightly different, but nothing that you would say clearly puts one ahead of the other. Of course, 5366, because of its long half-life, has the potential to be a monthly program as well. I think it's an interesting choice from Gilead's standpoint if they pick one, and they could have the option to pick both as well and move them both forward. Okay, great. I think definitely very exciting news on ABI-6250. Can you talk a little bit more about the mechanism there? What was the thinking behind moving it into PBC and PSC in addition to Hep D? Also what you saw in that phase I-A that gave you confidence to do so? Yeah, I alluded a little bit to it. It's really a discussion with KOLs on the fact that we really think of ABI-6250 as a hepatoprotective molecule that's preventing bile acid entry into the hepatocytes. If we think about cholestatic liver diseases, particularly PBC, PSC, they're driven by bile acid uptake. I think mechanistically, there's a very clean logic to it, and Katie can go more into that. It's one of those things that the more we thought about it, the more we tested the hypothesis with KOLs, and we thought about the clinical study design, which makes a lot of sense for testing against current standard of care and potential add-on therapy. The resounding feedback was positive as to, yeah, this is definitely something that would benefit patients and something that would be worthwhile to do. In terms of the mechanism, when we initiated this study, it really was to identify small molecule inhibitors of NTCP for the treatment of chronic hepatitis delta. NTCP is the receptor that hepatitis delta uses to enter the cells. We had the clinical proof of concept from all the efficacy and safety data from bulevirtide. It was a natural fit there to go forward and look at this molecule for HDV. The results we got in the phase I-A study, where we saw dose-dependent elevations in serum bile acids, those elevations were either consistent with or actually higher than what's been observed with both the 2 milligram and 8.5 milligram doses of bulevirtide. Additionally, as we were doing the preclinical testing with ABI-6250, as Jason noted, we had demonstrated that ABI-6250 also had low nanomolar potency against bile acid transport. That resulted in starting to think about the hepatoprotective effects of ABI-6250 for cholestatic liver disease. I think, again, the elevated serum bile acids that we see in the phase I-A study suggest that we are having a hepatoprotective effect, preventing those bile acids from getting into the liver, and that's why we're going ahead with the cholestatic liver disease study. Got it. The phase II is a basket study with PSC and PBC. Talk a little bit about the feedback you got from the FDA with the pre-IND meeting, the protocol there, and what you're looking for in that trial to see a signal on moving forward on one or both. The basket study really allows us to be very efficient from an operational standpoint. It allows us to have one study, open a site, and then that site can enroll both PBC and PSC patients. It should allow us to get to proof of concept more quickly. It will also facilitate our discussions with the regulatory agencies as we generate a body of data and then decide what the next steps are in cholestatic liver disease. Got it. Yeah, as far as the feedback too, I think, part of the timing was that was the last, I would say, gating item, if you will. It was basically a check the box, which is attributable to the preparation we've done ahead of time with KOLs carefully thinking through the study design. The way we've designed the study is very interesting and also makes sense as to how you basically market commercially. We're going to have three arms. One will be standalone ABI-6250 and second-line, the other will be third-line on top of PPAR. It kind of exemplifies how we think we could win with ABI-6250, in that, given the mechanism, you could have a scenario where you are a second-line single agent, and that would be obviously the home run scenario. We also see a scenario where additive benefit with PPAR is going to lead to potentially second-line therapy and improve alk phos reduction or normalization. I think the way we've done that trial will really also just frame how we would fit commercially in that. A lot of thought went into that as well. Got it. Okay. Can you elaborate a little bit on the endpoints that you're looking to evaluate there, and what do you think good data would look like that would prompt you to move forward? Yeah. We're taking a pretty comprehensive approach in terms of our efficacy endpoints. We'll be looking at biochemical endpoints, such as alkaline phosphatase, ALT, bilirubin. We're also going to be looking at non-invasive biomarkers of fibrosis, FibroScan, things like that. ELF score. We'll be looking at pruritus itch scores, as well as overall quality of life scores. In terms of what endpoints we are looking for, I think that's a little different depending on whether you're talking about PBC or PSC. We know from other studies, as well as discussions with the agency, that biochemical endpoints are an approvable endpoint for PBC. I think we'll be very focused on changes in alkaline phosphatase in the phase II, and then that will help us determine, assuming positive results, which dose to take forward into phase III, and then that would continue to be the approvable endpoint moving forward. For PSC, it's a little bit different. Right now, it's clinical outcomes, which is really the approvable endpoint. There's a lot of activity in this space, a lot of ongoing discussions with the agency, that could change. For right now, because this is a 12 week study that we're planning for phase II, we're not really going to have enough time to look at clinical outcomes. What we're looking for is directional changes in a variety of these efficacy biomarkers. I think we can look to a study in PSC recently with elafibranor phase II that was published earlier this year that showed directional improvement in ALP, fibrosis, as well as pruritus scores. That's really what we're looking for phase II. Assuming positivity, that would then be an ongoing discussion with the agency to see what we would need to do in order to get approved in phase III. Got it. Is time of development also a factor in terms of whether or not to move into one or the other or both of these indications, given biomarker outcomes are obviously much quicker to get to instead of clinical? Yeah. Certainly the PSC studies would be longer. we'll have to see what the data looks like in phase II and then map all that out. If things look good for both PBC and PSC, we might be able to get a quicker win with PBC, but I think PSC could follow along from there. Got it. On safety and tolerability, anything that you are looking out for in terms of off-target effects? I know pruritus is a big thing for. Sure. PBC as well. What are your expectations on that as well? Yeah. From the Phase 1a study, over 10 days of dosing, we had a good safety profile, no AEs of pruritus. Additionally, we've completed our chronic toxicology studies, and we have really great safety margins. No safety signals of note that we need to be following up there. Certainly, we will be continuing to monitor with pruritus. I think what we've seen is that it's the intrahepatic bile acid levels are what's driving both the disease as well as the itch. When you have elevated levels of bile acids in the liver, those result in triggering the FXR pathway to shut down de novo synthesis of bile acids, and that triggers elevations in IL31 levels. It's been seen that elevations in IL31 levels seem to be driving itch. If you look at PPAR agonists where they've resulted in reductions in intrahepatic bile acid levels as well as reductions in IL31 levels, that seems to be driving lower levels of itch. For ABI-6250, which is going to prevent bile acids from getting into the liver, we think that will drive lower levels of intrahepatic bile acids as well as lower levels of IL31. We think we may be resulting in lower levels of itch. At the very least, we're looking for neutrality with itch, but we think we could potentially get to lower levels of itch. Okay, great. On PBC, you talked about positioning second line as a single agent versus third line on top of PPAR. What are the considerations there in terms of, first, what you want to see in the data, and also commercially, how those markets would work and where ABI-6250 could fit? Yeah, certainly it's data-driven, right? Obviously, as you think about alk phos reduction, and I think just coming from EASL, most if not all the companies and the KOLs are talking about alk phos normalization. There's your obvious, if we're able to normalize more people than PPAR alone or, that's your win, right? Either if it's added to PPAR, you're normalizing most if not all people, or in place of PPAR, that's the most obvious win. That's obviously a high bar because PPARs are quite good, but something that because it's a different mechanism, I think it's a unique mechanism and given that most of the bile acids are coming through NTCP, we think there is a good possibility of that being a superior outcome. That's the first, the highest kind of commercial potential. Like I mentioned earlier, I think if your quote unquote worst case scenario is additive PPAR and that's still getting patients to normalization, which is the ultimate goal, I think that's another huge unmet need because once you get through UDCA and then also PPAR, if you're still not normalized, they're still that big unmet need regardless. That's why we like 6250 in the markets in general is because you don't have to necessarily beat PPARs. I think you can work together with them. I think we're uniquely situated where we're testing very low doses. We're going to be testing one milligram or less. As you think about co-formulation, et cetera, I think it's conducive to doing that. You could have co-formulated products down the road that are added to the patients or you could have standalone agents. We like the flexibility that 6250 could provide. Are there any kind of considerations in terms of safety and tolerability on that combo and also on efficacy? How do you see the mechanisms? Is there a synergistic component potentially to them as well? I think you've got kind of multiple intervention points when you think about bile acid and bile acid flow through the body. You've got the IBAT inhibitors, you've got PPAR agonists, you've got NTCP inhibitors. From a safety standpoint, again, we've had really good results with ABI-6250. We also think that ABI-6250 is directly preventing the bile acids from getting into the hepatocyte, that really is going to have a direct hepatoprotective effect. We know that the majority of bile acids, anywhere from 75%-95% of the bile acids, are recycled in the body as opposed to de novo production, which is a lower percentage. We think there could actually be an improvement with ABI-6250 in terms of achieving biochemical outcomes relative to the PPAR agonists. From a safety standpoint, I think, and pruritus, we talked about that before. Where it seems to be driven by the intrahepatic bile acid levels, elevations in IL31. We anticipate with ABI-6250, because we're blocking the bile acids from getting into the liver, that we will hopefully see reductions in itch there. Is it reasonable to assume or possible to assume that you could see pruritus lower than PPAR on its own in the combination? I think that's possible. Obviously, we have to do the study and find that out. Right. Yeah, I think it's unknown with all these different intervention points, what percentage of those is driving the elevations in intrahepatic bile acid levels. It's difficult to know which drug or which combinations of drugs is going to result in the greatest reduction in intrahepatic bile acid levels and then the best outcomes for patients. Got it. Switching gears to hepatitis B, that data is a little bit more near term. Just remind us the trial design there, again, endpoints and what you're looking for in terms of good data. Delta. Delta. Delta, yes. Yeah. There we're looking to do a longer-term study, probably 24, 48 weeks, looking at multiple doses. The target there is to achieve elevations in serum bile acids that are going to be either consistent or greater than bulevirtide. We know from those bile acid elevations with bulevirtide that that drives multiple log reductions in RNA, good ALT normalization. That's what we're aiming for there. Okay. How are you thinking about ABI-6250 as a small molecule versus some of the other platforms that have come out against hepatitis delta? Yeah. At the end of the day, everything is an entry inhibitor. They're all preventing entry of the virus into the cells. I think where we think ABI-6250 brings benefit is that it is a small molecule, so it is a daily oral medication. These patients are also infected with hepatitis B. They're already taking a daily oral medication with their NUC, and with the low dose that we're anticipating bringing forward with ABI-6250, we think that sets it up to be easily co-formulated with a NUC, so patients could continue taking one pill once a day, and they could be treating both viruses. Even as a standalone, I think this is a situation where being late to the game as far as commercialization, we think is to our advantage. Obviously, Gilead just got dolutegravir approved in the U.S., they're going to obviously be spending a lot of time building market. You've got Vir, Mir, and Bluejay. I think that's a benefit for us because obviously they'll help build the market. Our experience, and we have a lot of experience in virology, is simple usually wins. You've got a small molecule oral, whether or not it's taken as a co-formula NUC, one pill once a day versus weekly versus monthly infusion. They have to go into clinic. I think it's going to be an interesting commercial question, but we feel confident about our ability to have a small molecule for simplicity and adherence. Again, we actually like having the market being built up ahead of us as kind of a nice roadmap. Right. Patients would prefer that ease of use anyway. PSC, I think we didn't really touch on enough. That's a relatively more white space compared to PBC. How are you thinking about commercial positioning there? Yeah. Yeah, like Katie said, it's going to be obviously data dependent, but it's hard to know if it's an outcomes trial or not. I think obviously, good news, it's a white space. If you're the first or only molecule to be approved for PSC, you've got a wide-open commercial space. The hard part is, what is the endpoint? How long is the study? Because an outcome study is going to take five, seven years to do, and then that's a long development plan. I think that's something that there are companies ahead of us in that space as well. They're having discussions with FDA, so maybe that'll elucidate either surrogate markers or alternate pathways. I think the good news is, as we generate this phase II data and figure out where alk phos is going, all the other markers, hopefully that will play into our case or discussions with the agency based on these other companies' discussions of what that next pathway is. If it is an outcome study, and depending on how the data is, it may very well justify doing that. I think, again, the good news is we have a year or two to sort out the data to make sure we see what it is. Also, keep in mind, this is all part of the collaboration, so likely we'll have discussions with Gilead as to if they end up opting on this, it's going to be a large discussion with them. Similar to thinking about that cost share for HSV-2, we would have that same kind of dynamic here. I think as we think about the development plan or Gilead thinks about development plan, if they opted into this molecule, it creates other avenues for multiple ways of attack to maximize the success of the molecule. Right. Gilead has opt-in on the molecule for hepatitis B as well, but it sounds like they will have opt-in rights for the other indications as well. Yeah, the way the opt-ins work are as per program, so ABI-6250 is a "program" so I guess this is, I would say, a good problem to have, that I don't think this collaboration or most collaborations anticipate that you're going to have one molecule that could have three potential blockbuster indications. I think there are some logistical things we're going to have to discuss with them because obviously it's three separate data points. Whereas HSV-2 was relatively simple, although we had two molecules, so it's a little bit complicated there as far as when the opt-in actually takes effect, whereas this one, similarly, we expect the delta data in advance of PBC, PSC. I think we'll have to talk about logistically how that works. The good news is either way, on the back end of it, if they opt-in, we would have the same milestones, royalties on all therapies, likewise, have a 40/60 cost share. It's just a matter of how you sort out those development plans and all that kind of stuff. I think that's all good problems to have and good discussions I'm sure we'll have with Gilead in the coming months. Remind us, when is the opt-in triggered for this program? Yeah. The opt-ins in general in the collaboration are end of phase I or end of phase II. Obviously, since we're initiating phase II for delta and also PBC, PSC over the next, call it 6 to 12 months, the opt-ins would be triggered after the phase II data. I think that's where the timing logistics come in, because if we've got, let's just call it phase II data for delta first, but then the PBC, PSC data is six months behind, how does that play into it? Right. There was really only one opt-in. I think that's the only logistical thing, but that's something I would anticipate we could solve. Okay, got it. Are there other liver diseases or any other indications that you've explored in your conversations with KOLs and in your preclinical and phase I-A data as well? Certainly cholestatic liver disease makes up a broad swath of liver diseases. Many of them are rare, and there's really limited, if any, treatment options for those patients. There's a great patient need there. For now, we're focusing on PBC and PSC because there's a larger number of patients there, which will allow us to more quickly get to proof of concept and demonstrate if ABI-6250 can work in this space. I think from there, in parallel with moving forward on longer-term studies in PBC and PSC, we would look to expand into some of these other rare disease indications. You could think about biliary atresia or PFIC for a few examples, but I think there could be a number of other diseases on the table at that point. Got it. I know this is probably a little farther away, but how are you thinking about pricing going into hepatitis delta and then PSC, PBC, and maybe more of the ultra-rare liver diseases as well? Yeah. It's an interesting question. I think there's a few ways to think about it, right? One is, obviously you could do an indication split, which is not necessarily the easiest thing to do, but depending on your doses, it might be easier, right? If you've got a quarter milligram dose for delta and it's like a milligram dose for PBC, obviously makes it a little bit easier, but you'd probably still have to do separate trials. The other way we think about it is, the good news is it's not like you're going to have a discrepancy where you've got a $5,000-a-year treatment and a $500,000-a-year treatment, so I think there's some flexibility. I'm sure the pricing will evolve as well. Obviously, Gilead announced the WAC was $280,000 for bulevirtide, and I think the average PBC therapy for people is like $150,000. There's a gap there, but it's not a 10x gap. Right. The other advantage we have, again, we may or may not be in control of the pricing decisions depending on Gilead opts in or not, being a small molecule, frankly, the cost of goods are pretty low, right? You've got a lot of flexibility on pricing. Strategically, you've got to think about, I don't know that you want to do what happened in the hep C days where everyone just kind of undercut, but I think you've got. Optionality there that you could do. I think the reality is, given the unmet need, it's really going to be based on data driven, and I think we'll just figure it out from there. Okay, great. Hepatitis B, ABI-4334 sole rights were returned to Assembly. How are you thinking about progressing with that program? How are partnering discussions? Would love to just hear an update on that. Yeah. As far as partnering discussions, we started a formal process and have a bank looking for potential partners globally, right? I think coming off of EASL, obviously there was the bepirovirsen data at AASLD, very encouraging, but also shows there's still a greater need there for the combination therapy to get to a wider cure number. We have and always have thought that the CAM is going to be one of the cornerstones of cure together with a nuc backbone. We continue to believe that, it's just we don't possess that third component, the immunomodulatory component to do that. Ideally, as we think about partnering, first and foremost is finding a good partner that has multiple components that could logically lead to cure and they could put that in the clinic. I think most important for us is making sure somebody could actually take that to the next stage because it doesn't make sense for us from a priority standpoint to do it. Certainly, we're focused and for years we've been focused on hep B cure and continue to be active in the hep D space, which obviously has overlap B. Our hope is to find a partner that would have that, whether it's the third and/or fourth combo mechanism, to put that back in a clinic and get to that proof of concept on a broader cure base. Got it. How much of a priority is it to find a partner with, for example, an ASO, where you can combine that, or are there any other mechanisms you think would be nicely paired with the CAM? Yeah. Obviously you've seen a few deals with ASOs and CAM, so I think that's a logical option, but I think there's also other pathways we're thinking about and other partners that have expressed an interest that might have alternative pathways. I think we're more agnostic as a mechanism. It's more just scientifically what the rationale is and how it would work and advancement in the field. In terms of those alternative pathways, can you elaborate a little bit more on that? Yeah. I would say there's some novel things at EASL that we saw that might be combinable with- Okay I don't think I can name directly, there's that. Unfortunately, there's fewer people in the HBV space, I think your field's a little bit more narrow. I think given some of that EASL data and some of the companies working on other adjunct therapies, I think there is a place where CAM and/or NUC therapy on top of certain other kind of therapies would make a lot of sense to either aid in suppression and/or go direct to a cure. Got it. You mentioned the bepirovirsen data as well. What were your impressions of the data and where a CAM could fit in? Obviously as a backbone, but maybe layering in additional alternative mechanisms as well? Yeah. I think one supposition, right, is that if you're taking the next second-gen CAMs plus NUC, because you're going to eventually lower S, right? I think the idea could be that you lower S to a level where you can treat with a bepirovirsen right, to get the cure. I think the question is, I still probably think the cure rate's at 19% or probably a bit on the low side. Right It would be more of a long-shot bet to get to that point. Obviously if you can improve upon the 19% or 26%, that would be the first priority to do a direct combination, I think. Got it. In exploring, I guess, the BD aspect of this program, is there an ideal structure that you're hoping to get in terms of, for example, going out for just worldwide rights and a full outright licensing or maybe by geography, et cetera? I don't think we're really focused on that. I think it's more finding the right partner, right? Ideally, obviously it's easiest to have a global partnership, right? Where somebody would take over global development, and then as far as structure, again, really not focused on upfront payment versus back-end payment. I think we're flexible on structure and that's our background, or my background is deal-making, so I think we can find ways to do deal-making that would make sense for both parties. I'm not worried about getting into an arrangement. I think it's more just finding that partner that we think will really advance the asset and drive the community faster, closer to cure. Great. Okay. In our last 30 seconds or so, remind us of your cash runway, and time to these important calls. Our last published cash flow was into 2028. We haven't updated our cash runway since doing the $115 million financing recently. Reason being is that the way we think about it'll certainly fund beyond the PBC PSC trials in 2028. Given we're expecting the clinical development plan from Gilead soon, and then we'll make that opt-in decision on the 60/40 split. Once we make that decision, we'll update the runway, but I think it's safe to say we're into second half of 2028, and could be longer depending on where we come out on the development plan. Also, our guidance does not include extension fees that Gilead would pay us or the warrants or anything like that, so we're pretty conservative on our guidance. Okay, great. Thank you so much for being here. Thank you.